CRL - Earnings call 3 2023 | Charles River Laboratories International, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Charles River Laboratories Third Quarter 2023 Earnings Conference Call. This call is being recorded. [Operator Instructions]

I would now like to turn the conference over to our host, Todd Spencer, Vice President of Investor Relations.Please go ahead.

Todd Spencer

Good morning, and welcome to Charles River Laboratories Third Quarter 2023 Earnings Conference Call and Webcast.

joined and Foster, President Flavia Financial am Chief President and I Officer. Officer; Executive Pease, morning, by Chairman, Jim and Chief This Executive Vice XXXX. for comment third our will results They quarter on of the

Following the presentation, will respond to questions. they

can with of presentation on Relations be be X website. beginning this also our call There of which ir.criver.com. at hours Investor website, call approximately associated quarter's will a be our is today's after conference today on is A Investor section replay website The slide posted available the webcast and next the accessed through replay call. available Relations will

forward-looking I'd from Act those safe results future statements harbor. Private differ like Securities make of our may prospects about materially of expectations, we remind to All plans XXXX. remarks constitute for Actual under indicated. Litigation you the Reform that and company the

for of believe and which During gain not a the financial measures financial be Investor of non-GAAP conference our meant understanding measures, superior comparable a substitute measures the can Regulation on with G, accordance core of discuss are results call, to to will considered you find investors accordance help operations prepared The reconciliations GAAP primarily non-GAAP and the operating we Relations GAAP. or section In the in we meaningful with website. guidance. results

Jim to I over turn Foster. will call the now

James Foster

per share both We quarter of $X.XX, Good and organic of third reported earnings which growth morning. prior exceeded revenue of outlook. our X.X%

is businesses year. year reflecting difficult rates our comps growth levels, our from anticipated, last this that the demand declined and the from half first moderating As affecting

and Discovery believe and quarter. led showed Manufacturing slowed clients This Services the clients signs, cautious of business but spending term. their to third structures. or a also early to pipelines client we more believe discernible including in Biopharmaceutical impact Looking at current the year, positive in persist some on end businesses our segment will cases, and biopharmaceutical cash We began certain some some a the to on cost streamline our continuing conserve RMS this their spending. the patterns their near the meaningful demand have has with reprioritize in impact remain trends are environment, -- market

encouraging However, also belief emerge, will starting seeing to are we some that early support signs demand our which stabilize. environment the

biotech the sequential improvement both indicators, the In are pleased external the see cancellation quarter. book-to-bill trends stable by favorable we study third rate business, environment. Safety Assessment in ratio supported to funding were net the and These a including in

the a in consecutive was third led funding increase quarter quarterly biotech basis, on by second capital The trailing venture XX-month investments.

X.X% will all of reported increase third in revenue the highlights driven billion growth of of last XXXX, in a year. our led over segment. a three third Organic DSA We performance. revenue provide quarter segments, business the quarter now increase $X.XX of X.X% by by I was mid-single-digit

revenue growth growth third As XX.X% by was last segment, global XXXX. biopharma third academic included quarter from clients was I to third demand comparison of driven by of By difficult quarter a earlier, growth organic the mentioned that in affected quarter institutions. year, client the solid and rate

segments, with also has outpaced small half biotech in difficult for slowed are comparison other rate driving biotech of year, the as As throughout the particularly of midsized more being last year these the case second the clients been and year. the selective clients spending. the growth all their client Growth

in segments. by driven the well and The the margin was XX primarily largely margin The both improvement were points basis These improvements RMS unallocated as was segment of slight as operating lower Manufacturing DSA increase by corporate an offset XX.X%, pressure year-over-year. costs.

primarily to This were X.X% per from of year. third line outlook, the top of exceeded last increase Earnings an the quarter due outperformance. share third quarter, the our $X.XX in prior

year-over-year interest addition, In beginning the expense is dissipate. from to headwind

into non-GAAP quarter We XXXX and our guidance earnings ranges move we as tightened for revenue of share final the the per have year.

X.X%, being forecast update and quarters Manufacturing lower Solutions cancellations We the guidance are to range shifts and by segment third gating due Assessment quarter largely $XX.XX non-GAAP to of narrowing quarter. for our our respectively. end the to of guidance the the per to a The top reduced by primarily raises our a outlook to favorable Safety prior between impact a bottom X.X% of share earnings is and revenue growth per organic in the of of the business in guidance our $XX.XX, $X.XX in range which trims range end fourth share, offset our

NHP with to like base results. segment's Assessment from performance, increase volume, and growth X.X% on studies. $XXX the additional volume third the DSA beginning to modest revenue higher study drive as will year-over-year. with an growth, driven provide pricing million, I DSA third you rate. details a DSA organic the work an was segment of discuss contributions NHP our pricing Safety was with to business post-IND and I'd But in on quarter basis. declined non-NHP-related shortly, continued revenue benefit quarter by study

stages an to our Discovery of enables the Services component it integral end-to-end of early-stage us forge relationships remained clients at R&D with because portfolio earlier process.

clients overall drugs detriment focus of the getting the by continues to demand spending. the post-IND to environment their be on to clinic work and business the as discovery However, biopharma impacted

book-to-bill some below sequentially The As The quarter in signs Safety improved lowest third I but business. of level our of favorable ratio since Assessment trends was the remained at improved second mentioned also Xx. earlier, rate for we the demand the cancellation and XXXX. sequentially, more early net saw quarter

third the backlog the at $X.X result, of second to the the quarter. DSA $X.X billion end quarter declined in billion a As from

along will cancellation lead processes, business. the lower book appear to as more However, reliable believe reprioritization pipeline quality of suggests a be moving further clients which to we higher in and their

in year. Overall, a comparison term, organic fourth DSA which, With XXXX, including net organic DSA our revenue reminder, believe faces enable backlog XX.X% our the near current trends is believe for the of last for as above below demand remaining quarter, in we growth reported including the the book-to-bill and persist to single-digit achieve will financial difficult a will prior segment. trends the high we growth to coverage Xx, stabilizing demand significant us outlook targets, which already

in Safety leverage margin The the quarter, operating third to was increase DSA be in revenue XXXX. the with Assessment The XXX-basis-point continued a XX.X% increase operating higher of third from driven the by business. quarter associated

and comment moving provided Day revenue on some better understanding RMS, of NHP NHP-related gain from be to and pricing of on believe a work. our investors study the September, the analysts to around DSA Investor At I'd pricing we on useful We impact NHP-related in rates. on benefit safety growth Before that our our studies information to additional business. like would our for NHP assessment information

at expected in of still growth revenue, both of which NHP single-digit X-year million in of In XXXX ending XXXX. XX% high or total is a would a NHP approximately revenue the approximately a XXXX. just DSA CAGR DSA pricing services total Over of growth NHP is NHP XXXX, pricing, represent expected total, period, by impact XXXX. since includes revenue, since segment Without XX% Safety embedded $XXX and to revenue have growth increased both DSA and benefit to revenue our revenue DSA the Assessment study

in around and model development. constraints NHP the and last pricing increase pandemic Supply the biologic supply approximately NHP since in $XX,XXX NHP due situation year in China began continued rapidly by escalated to drugs the increase per to constraints has This the due has XXXX both aggregate caused supply XXXX. Cambodian intensified of in NHP to U.S. since pricing

This worldwide. generate focus NHPs XX,XXX In of work, by higher which safety approximately model assessment per to XXXX, studies, approximately a assessment in XX,XXX from demand post-IND of with year, we to and expect in these studies XX% on used represents prior generates principally utilize longer-term service driven biopharmaceutical safety are reduction the the current level that NHPs the service fewer our their revenue revenue. nature of due to clients' over

reducing and is imperative principles. the includes adoption modifying use, our animal NHP year strategic usage. this supply its the responsible XR of in commitment embedded constraints. animal to And Responsible a which long-standing A company the result animal welfare animal as of or is firmly accelerated use

of One but groups we or existing groups and with the animals control with statistical VCGs, to control active the replaced example and introduction control evaluations. adopt, Virtual are toxicology sets studies. data of our discussions time groups, randomized progress VCGs. virtual for some about It is having clients take will our

are NHP strategic and be you emerge aware, update NHP early ideal have of societal causing is XXXX. in many strategic of disclosure industry the The and initiatives As to as will evolve. this sourcing our additional these needs disruptive timing we to are a providing recognize changing, and to on shifts update on technologies we comprehensive committed

position. point, drug reinforce inflection and in an development we our at maintain the With critical role industry leadership our preclinical will

will lives and to this safety bar. to science, healthier remaining our ensuring mission leading the ourselves creating by consistently patient do raise and challenging We by with committed of essential

the we also we'll longer-term focused look pursue supply to And a the as we And adopting be on in particularly ensuring alternatives. NHPs. a chain, will animal industry for to sustainable strategy future, lead

in our Cypre We've working tumor diligently to for made is investments processes summer safety endotoxin launch technology Trillium Discovery look non-animal our testing, modeling. sequencing several and technologies, XD for with for from to key team next-gen sharing in in vitro these We study NHP XXXX. initiatives this strategic ranging AI, Our Endosafe early update viral Valo continue forward our our for already areas. to to PathoQuest partnerships and in detection testing for enhance

is timing year-to-date of last growth shipments from high the organic two primary the RMS increase $XXX.X This for biotechs anticipated revenue of million, including single-digit over XXXX. clients, was and basis demand the slower reasons: X.X% an below NHP an China revenue we within CROs; and quarter. mid-tier third of as rate quarter on

China of is NHP timing shipments The within transitory.

some NHP China the XXXX. out revenue slip shipments expect in improve quarter, will although We in fourth of will

in mid- the revenue range. organic growth single-digit to For RMS expect high we will be the year,

revenue In in the growth quarter, generated we our and in models small business services business. third the research

clients mentioned, biopharma demand China, But Small including clients and demand geographic across driven affected RMS revenue segment revenue by mid-tier global demand drove as environment regions, as growth. well government this principally offset increased from softer was I all client biopharma the by institutions molecules and remain by academic robust accounts. broader Our by price. from as

our operations. by services business growth, solutions continued Our report and to led healthy CRADL in-sourcing

remain utilized generate to space, rental vivarium flexible year-over-year well our or overall sites, significant continue and revenue CRADL growth. Our

quarter, margin timing XXX was significant of in mix the our XX.X%. In NHP of shipments business basis the points operating academic clients favored which decline the RMS business, by as decreased by Solutions China. The as to within the well driven third Insourcing

to due NHP the will the the expect shipments. timing margin of in part quarter in rebound RMS We fourth the China operating

in year. margin softness Investor the Solutions the and quarter third future. mentioned attribute Insourcing impact The reviewing which profitability we Day, in million, post-COVID we an $XXX.X biopharma compared increase we experiencing benefit the at RMS end third to as manufacturers, contracts, broader quarter. These are organic suppliers. Microbial the certain was last basis market Solutions segment addition, an operating for should Solutions started Revenue of which across noticeably the on markets, the slowdown In conditions is of CDMOs Manufacturing the to from to of segment more a the their business X.X%

Clients, must costs particularly commercial these continue clinic, volumes part destocking products. testing clients as efforts are programs and their advanced of fewer manufacture into and cutting COVID the reducing to CDMOs, but

long-term our of rightsize. segment will the believe we So a period reemerge for after Manufacturing trends growth

reduce testing seen the in life instrumentation where instruments. includes and For clients and a global operation biopharma a product China, affecting client Microbial Endosafe in demand. endotoxin we environment have line testing science companies, investments as microbial small new Solutions, is our This decline many have both demand like volumes

as of microbial continued such other the Accugenix identification to well. areas However, perform business, services,

biologics is of which cell Third funding projects and quarter to be at to clearance resulting clients demand tighter trends challenged the The viral various in since testing by that process, be those sector reprioritizing in experienced including can the the year. development and similar reducing the during were continued conducted banking. beginning services for environment, times

gene since and market another rate immune implemented to other of in double-digit the growth business CDMO XXXX therapy, the the quarter initiatives businesses, with manufacturing third not beginning in end has performance. had the While the solid success strong to quarter. reflected of the Its cell improve CDMO challenges, the team

second expectation of expand and a approval cleared sales of will that client regulatory production the new for believe regulatory site We commercial Memphis and several We therapy additional are CDMO pipeline interest audits our including that to will product. generate continue add support products recent to cell we new successful clients. our months, European in to audits pleased diligently working have are of EMA our

margin improve markets. operating the margin XXXX, revenue growth sequentially. segment's declined across The to lower Manufacturing in softer decline reflected rate XX.X% third the by again XXX did The trends of the year-over-year basis the year-over-year end points but demand quarter manufacturing and

operating contributor to margin the CDMO targets. focused business, of driving including profitability We as the to expected Manufacturing are is intently the on largest segment margin this in achieving segment, improvement our XXXX be the

We discovery IND help the outsourcing development as clinic believe manage into our to associated an programs current our and demand enabling the and leading us commercialize efforts for environment. is drug mandatory services to we that partner in position drug are their nonclinical drugs. The eventually and clients' nonclinical to provide clients advance helping

leverage with enable attributes, and targets. of significant ability in also will the to to because marketplace our continued our the We ability early-stage that combined scientifically. to these focus achieve portfolio us us differentiates backlog, unique ourselves R&D Our our distinguish our solutions DSA on believe financial

science proposition and of more efficiency in base. reinforced River speed market exquisite and value today's to and continues with driving differentiate is greater the delivering Our budget-focused Charles to marketplace client

their like support. conclude, thank To commitment I'd our shareholders clients for exceptional continued work for and and their employees our and to

provide performance will our Flavia additional XXXX and guidance. third updated quarter Now details financial on

Flavia Pease

Jim, and morning. good you, Thank

primarily acquisitions, I of costs and adjustments, revenue other translation. refer items. impact currency capital and also restructuring you investments venture comments to divestitures strategic and certain which and amortization gains organic certain may will primarily excludes begin, acquisition-related related the actions, that other results, from foreign Many to exclude of speaking growth, which to my I Before remind be I'll losses or other non-GAAP

year. sequential included We're which over pleased of organic Non-GAAP earnings per margin revenue represented and X.X% with increase basis. XX-basis-point an operating representing a of third quarter growth on increase prior results, our a a for X.X% and share the XX.X%, the both $X.XX quarter year-over-year

dissipate tax restrict Avian and headwind beginning As expected, anniversary continue is the business increased growth higher Vaccine the increases. interest a rate rate earnings to of expense, the we divestiture last interest year's but year-over-year to rate, as

remain Our but we third our to environment. outperformed prior cautious outlook, quarter market with discussed, end biopharmaceutical regard results Jim demand as the

as ranges reflects the updated normal year fourth in Our the of outlook between our a narrowing forecast quarter well quarter quarter. the slippage a reduced the than This is forecasted DSA and we into of in cancellations the gating the practice offset fourth part the quarters. in fourth as the move due third our in segment, for as to segment third lower by study guidance for and Manufacturing in our outlook shift

the and effect on basis for cumulative growth we our earnings an which factors, these expect guidance range Given to the year. of to represent have a to ranges. X.X% narrowed X.X% a growth and our X.X% in full of share revenue now on end reported organic revenue the per prior non-GAAP low midpoint basis, of We X.X%

more offset including our pressure demand the DSA year. continued in by segment for will trends, we partially expect believe a be in softer the reflecting Solutions We the outlook favorable the Microbial business, which segment, for Manufacturing

and resulting to outlook a margin disciplined a in a consolidated $XX.XX disciplined with modestly in range non-GAAP investments, implementing in lower will manage in greater managing driving We the of effectively financial expect to improve $XX.XX. of prior taking costs efficiency, to share guidance manage XXXX, with We'll environment. initiatives share than our earnings achievable our operating per business continue in our manner, margins in and be protecting targets, and performance remaining by the setting $XX.XX $XX.XX to that this focus other compared to operating

$XX actions million our evaluate environment. manage annualized generate with in current cost to the Restructuring expected our and year to savings. we'll this implemented align appropriately approximately are cost domain continue operations to We structure

slight growth for Our each updated segments. of outlook reflects revisions revenue our

outlook we reducing referenced, organic low from just the single Manufacturing I to in our to As outlook are prior the growth digits. for segment high single-digit flat be our

timing mid-tier This clients' For segment, also XXXX. softer mid- the of deferred the which reflects impact a organic be end have to high discernible bottom segment in our biopharma to more may our we And growth. from RMS of demand. China, widened some single-digit shipments NHP outlook the of RMS experienced to

Our quarter improved referenced. reflects slippage that lower DSA outlook organic in high for study growth, to I revenue single-digit the third cancellations and segment the principally the

power now quarter our third Unallocated details some agreements, items totaled the primarily VPPAs. will $XX million benefits that our in corporate I provide due additional purchase quarter total to X.X% through virtual affected nonoperating third The on last costs X.X% or of to the performance. compared or was of revenue revenue decrease achieved year.

full corporate the the Despite the X% revenue continue approximately favorability of to third be to in for year. unallocated we expect quarter, total costs

globally we facilities solar and our our electricity, North X achieve October, achieved gas America to and in Europe. we component VPPA regions in a X providing announced those emissions. enabled As renewable electricity have in have a XXX% to reduce a VPPA agreements wind of renewable key XX% through in greenhouse These efforts Scope

The rate XX.X%, same quarter non-GAAP to rate geographic increase due year-over-year year. the period third the The representing from tax was of last a higher XXX-basis-point tax was earnings. primarily mix

rate tax tax because our benefits to related favorable tax of the expectations, principally discrete However, U.S. credits. was R&D to

For the approximately our the low discrete to be now range, the tax the rate tax end benefit. year, XX.X%, of due full we or will primarily prior expect at

sequentially, $XX.X interest due for third the Total adjusted of a expense was to million, decrease repayment. primarily quarter $X.X net representing debt million

outlook to rate Federal For million adjusted $XXX $X our we total will net a on XXXX a year impact million the by the have as not of million, meaningful the increases by the to any full range our further end of interest year, before have expense $XXX narrowed Reserve results.

our at debt $X.X of third rate. billion end was of quarter, fixed interest the XX% a in approximately At the outstanding

cash of $XXX.X million both million the The to was and capital quarter third capital at X.Xx gross year-over-year expenditures. working compared flow Free in third last well as lower as year. end quarter. due approximately was were to changes the Our the favorable primarily in increase leverage net ratios $XX.X

year, third guidance to quarter compared the cash to million. were For our the we to free in $XX.X $XXX expenditures last Capital flow have million $XXX $XX.X a range narrowed of million year. million

our we $XXX $XXX of CapEx or million million range $XXX For the be of to in outlook to below $XXX to the million. now million year, expect prior

the take a found current deployment and financial be are can year summary XX. A continue and aligning our trends. for capital approach investments to to guidance on We capacity managing Slide demand full to the committed our our of with updated disciplined capital

With year, embedded in X quarter quarter outlook year. full guidance remaining in fourth is the the effectively for our our

the on $X.XX. outlook XX.X%, For rate basis share in of revenue provided organic revenue the outlook the expect August. we are the at reflects fourth to growth The in with including XX.X%. DSA fourth year quarter, Non-GAAP XX% reported reported flattish an revenue of earnings This organic to expected of in challenging by quarter will range is to and decline on half of organic basis. nearly growth year, which the comparison consistent in mid-single-digit to result the second a be year-over-year we largely $X.XX a prior very growth per a when

pleased despite Thank work seeing We'll you. environment diligently cautious in the to to rates challenges evidence of broader levels. to as financial market conclusion, to normalize resilience continue our of achieve our with which response a our we are the business, In spending biopharma performance, we're targets. in is pre-pandemic environment quarter third prudently manage solid business and our the growth

Todd Spencer

comments. our concludes That

now take questions. your will We

Operator

[Operator take with Coldwell first Baird. our We'll from question Instructions] Eric

Eric Coldwell

awards on DSA? the gross provide the on bookings the in X? Just Truly the above could positive, XQ, in X, appreciate additional I'm in those NHPs. curious, Were gross commentary you color on below details quarter? any all

billion. $X.X how to reductions at backlog, and take wondering on I'm the to might end? the thoughts where when may -- What additional have on then what long it that if level? backlog you an for stabilize And come net

Flavia Pease

the saw improvement remarks, net also, Eric, And had X prepared yes, sequential we in book-to-bill the our you in gross in the quarter. a bookings were as in above third quarter.

the bit a quarter. It $X.X second little at backlog from billion in It's second billion $X.X So came the down was quarter. the now.

we're I have as norm talking we reverting back about. it to think pre-COVID that stabilizing, demonstrates things the So and are been

Eric Coldwell

jump I Jim, more. if could just with in one

Investor an had You Day so not ago. long

some does the ago, change or XQ a new that the LRP on outlook today of here over curious, seeing I'm just while XQ, Some market anything -- maybe was timing confidence the just X. impacts, achievability, additional you're provided change last on month levels? updates your

earnings. on hovering know specifically then XXXX, guidance but around Street's later, And you I of give to plan $XX

this expectations update your with some realistic think I'm where controversy levels about on that's are I for provide comfort target. next with comfort high-level just a year? Street views might whether

James Foster

feel about just gave. So Eric, confident X-year our that we guidance we

and about on achievable I on on talked I think on segment a those both little relative company we basis. hasn't total a And say that basis view changed. numbers a that call, significantly 'XX, are would which bit

ends. But We had to complex want market a only month. We've it's environment. how the see a definitely quarter fourth

So numbers. it's good details X-year more really the too early on to about provide feel we but 'XX, any

Operator

We will with take Evercore. question Anderson our next Elizabeth from

Elizabeth Anderson

from Eric's that like Just I like make pushouts DSA bookings, in from at want a issues? sort apples-to-apples on sure just follow-up Do of everything timing terms or looking you to any basis? see we're an impact question. just just of

had the a been And expecting. quarter? you about we talk the little weaker in than flow secondarily, It's can cash

sure -- I I and takes understand all wanted So there. to understood make the just of puts

James Foster

We've isn't seeing we're quarter. slippage always saw that we So that about We -- but in and obvious. slowdown higher definitely Definitely a year, a cancellations this third lot. talked cancellations.

that. see to pleased So

are that, a quarter feels to want that -- kind things period it it and like So We're of to put after We the I apostrophe getting an back cadence. normalizing. mean. certainly pre-COVID finish after

booking XX, months. we're So the that had studied more out XX part it's got always of pronounced because we business, volumes

actually that a that a booking would slots that saw they really when not often had committing, some point too they ways, to we because didn't In was just study. and some ways, long got knowledge necessarily probably that of nice. study was the have In clients

little bit a that's So disruptive. been

as as Not settle as good more as with were, to years where to Impossible that's now. not consistency going backlogs were moving probably but place ago. So normal out. long it's and a they a more sure tell more rate. towards cancellation But we've got better pretty they predictability,

I think other question. will answer part that the Flavia of

Flavia Pease

-- was million actually solid. up prior reported $XX Elizabeth, quarter XXX% on last slow about pretty cash in a close was $XXX We base. or almost to free flow, million year, versus that the year -- was relative XXX although

For is the little year, flow pressured. cash a

movement timing solid Some working still think that, a performance. capital, but and on inventory receivables and of it's very I

We CapEx actually have for the our lowered year a little bit.

Our investment guidance, above of reflect Day of demand as that X%. given to CapEx told we would be to QX, the little X% you saw a modulation in what our been our environment sales, below all current in you X% at is capacity Investor target was we've bit -- which

think demand cash well, flow performance, we'll fortifying for our navigating current I solid and free environment the the we year. are deliver

Elizabeth Anderson

the not on think you're way quick then incremental payments given forward? that to slowdown seeing pharma going double said an things So Just current in CapEx environment? you is two about And payments the like things to there. or biotech

Flavia Pease

Yes.

So comments I'll two those out. parts

So not receivables or to any seeing and we side. significant any are bad of creditworthiness. similar regards or nothing with in any the debt impact significant impact There's unusual metrics

to we're saying I'm from we lower provided a to X% off just that in we the months relative that, coming quarter. third X.X then not were ago. the perspective, And X% capital of that, about

Operator

America. will from Bank our We De of take next Derik with Bruin question

Derik De Bruin

on happens benefit EPS what's have commoner and goes back? the I question line think the NHPs. pricing when top margins from But been additional is since the appreciate XXXX? the key I And investors what Jim,

see check are $X of year back It to rough mean, my like I envelope, I and the benefit you similar, this earnings, math. can about assuming looks the accretive. a margins always but they're it's

immediately like really that like about it's back, clear the not I this pricing with NHP the how about do EPS go I think going as what back to trends? to that you of know talked aren't sort looks pricing what you really like help would is going but does is if think of sort air, like, just investors question prices keeps think You coming -- normalizes? one up to fall --

Flavia Pease

Flavia. then it's Derik, start, Jim can and comment. I'll

a think impossible prices when little of if an and come it's I down. bit will

we have I provided a much been as has -- have not perhaps a predicted. but our as think benefit, benefit in as We disclosures, people of additional price

have diversified and price manage help through us -- which We supply base, and mitigate mitigate helps fluctuations manage volatility. and

we of have taken pricing modulation Investor in our NHP of into consideration a said we As in our outlook. Day,

already we consideration we all the years. into our numbers as provided So that took next LRP you for X

I than I I don't know that. -- Jim? additional speak comments. more any have

James Foster

mean We the of what the for the as that have that We is I volume as duration there types be still is. is NHPs the think for that incremental studies, we'll get are we dramatically, of years last numbers. passed Most risen price besides think the few and I prices prices price of and mix sufficient a result some have reduced of reflected. because through. think because flat, the will moderate perhaps,

I thinking there's it's anticipating. So -- but are than more a benefit, think are modest been people

from think we like I could really pricing. -- away say to we really that's all that to stay

Derik De Bruin

Great.

how -- the like to different RMS down Okay. NHP what rest business? much a was the was And just switching sort world? the from how pushout impact And of XQ? versus you also, And the to China the follow-up. China microbial Can the in in much of as what quantify to of something was that

James Foster

actual numbers, sales you China the are Yes, consistent. so the giving NHP without not

quarter-to-quarter. So they of shift sort from

we'd like an so at basis. to that And annual on look

more likely quarter. that fourth happen we're see to So in the of

into over slap might that of XXXX. Some

question part first the your was? of And

Derik De Bruin

TMicrobial.

James Foster

Microbial.

for there, working things several yes, sure. So

China. from impact Some

supply. a some local terms past moving we but profitable of With difficulty regulations, small not but We interesting -- in that. we and have have Chinese had just small a should be business, has which

mean, providing news good good testing a for into these is I business, less law. but drugs less the drugs clinic are have that of the parts Probably that news. many require a that days. a approved, Like microbial going release modality lot is That's or of there's that the been through going business testing

So impact. some that has

that the us from last also of have year. of end product bought an awful We at lot clients

will year be they don't up we course, they that of to the of but sort much so an know like, Of be of less. that stock or inventory fact seems it need at end this unloading probably the

an recombinant products available. point being The interesting is with business inflection the

will for to us has forward take to a been But of think it I client our while base some get there. traction. looking aspect

good very a have product. We

feel we about So that. good

slower we that's slightly kind seeing from would consistent have with a board, think we're growth liked, than particularly demand biotech. but the of rate that across So I

Flavia Pease

add amount, quarter. modest it revenue it to us. relatively modest is the it's still third RMS point, specifically growing been has a Jim's impact. a but We're just the to to Microbial is for just the Derik, the on while small, not specify in business China nicely the to NHP, headwind And going

So does the affect microbial that rate. growth slowdown

Operator

Casey take our will JPMorgan. from Woodring We next question with

Casey Woodring

wanted So follow-up. on a to quick bookings. touch the just I

So on grow drop did have And did I one quarter-over-quarter? just cancellations quickly sequentially? just the per then gross Or bookings revenue NHP.

the if exposed that of use gave here, NHPs. year XX% per It to like we DSA you is revenue numbers looks

you close If back implied, it to out XX% in revenue the looks NHP per year-on-year like grew 'XX.

forward-looking per contemplate should how NHP on we basis? revenue a Just

Flavia Pease

So question book-to-bill. I'll take on the that and cancellations in maybe growth

of that cancellation we third So XXXX. in was level the we lowest quarter our the had in stated the since seen also second I quarter think remarks, the

and about normalization of So we talking eventually environment, I would that, think a modulate. domain going the reprioritization, we speculated pipeline, through people their have had been that

expanded had to as As a part normal significantly the level Jim but its backlog a business, seen of the is and at certainly said, XX of we higher cancellation months. cancellations slippage peak

in a people And say, would compounds. The so as said. the lot rationalization their quarter prioritizing of, I and X, was we above was gross book-to-bill there

the the the third quarter net so did in book-to-bill second lower And improve cancellations help the versus sequentially quarter.

part you about that repeat the can question. answers And your the NHP hope I pricing? So

Casey Woodring

Yes. led NHP. per a revenue used this just higher less to lot It of the amount year NHPs was has

a So there? just thinking just trends about that that around on Any basis, forward-looking color trend?

Flavia Pease

Yes. the Thanks that. the higher we're that for conducting and driven basis, still, last clarifying relative NHP is on revenue types And so. studies more a of Yes. usage by

significant post-IND of prioritized in seem our work, and are of And as do into These to impact a longer nature. clients well. As mix the studies that are we we study amount post-IND work. be seeing

units, relatively as said. less since but perspective, higher mix a you I from revenue they so in result -- And last they longer,

It's depend work, it see what reverse used. clients of demand. numbers on with back units going higher of -- if being a will pre-IND happens to we are the So -- really you

that So going are our predict, don't if are be to their it's pipeline we to or this to focusing be point, on hard know clients prioritizing clients at going for IND us given they're studies. post pre

Operator

question our will We Patrick Donnelly from with next take Citi.

Patrick Donnelly

moving being the you a guys for that about, maybe to obviously talk the light. was bit lower think came mean on Flavia, those going just them SG&A right offset and little I I lower. guess, pieces to Can margins And one the about with Gross forward? then that the the in way with a do side? manufacturing just quite you, you margin side. on just two

Flavia Pease

Sure.

margin gross was yes, dominant. So the

shipment aside of And with You also the timing saw down and appropriately pointed domain about versus of slowing environment growth bit last RMS manufacturing. was little as the NHPs. commented, putting impacted the quarter, a we by X% to

fixed the VPPA. margin have those our I leverage impact benefit in about and talked businesses So pressured our two my ability in in to prepared remarks were of G&A, and the overhead

So it for points margin basis us put year-over-year. expanding margin all operating strong you DSA another XXX together, had quarter with

XX points And were QX a well we better excuse of So bps as in bit mix prior about of at XX me, versus businesses there. XX.X as there's -- year. total, little

my adjust environment. indicated to infrastructure As footprint disciplined in remarks, as are in remaining our current demand -- we prepared would that ensuring and expect, I our I we the also

when that million. -- of savings some into implemented about completed, translate will have all $XX We restructurings annualized will

the think the our going terms of in actions. to the are when see as so margin lag bit businesses little demand to environment, of And these benefit there's of rightsizing current you're about a a you we

expansion. expect we what -- some I in But all years commented margin think we to year. versus last down be Investor Day for to to provided to in our the continue terms that of you we expect in insights OI expect slightly And we terms of next X flat

Patrick Donnelly

And the I the just just last quarter? about one appreciate to Can it. think on here then bookings the more cancellations gross one without of numbers gross helpful. trying Again, side. us gross bookings that's on feel was maybe quick you kind book-to-bill what out side. No, the just Okay. help the

Flavia Pease

Yes.

above in specific What a number. X well disclosed Book-to-bill been haven't we as QX we have has growth. said So is as QX.

earlier influence So I fact third book-to-bill quarter quarter it what to the lower the net the be said up was be And question, second as the in continues an in to above. sequentially were to cancellations versus that third the quarter.

Operator

our Dave Jefferies. We with from will question next take Windley

David Windley

questions. to up follow I on of try to prior couple wanted a

Or NHP of needing I'm I also are you're sort maybe the of without on about I -- -- impact? a CAR animals. would you've sure that thinking effect longer animals, revenue this to there you something implied. annum. your not morning. I like lowering long-term want -- numbers have the revenue on point these that think also there unique per of exclusive if also talking have I XX,XXX that Casey's run understand kind that the that's that the are Is in Flavia, is some just the studies understand of like So for or I about to guess, disclosed and more reuses that question, example, make per contributors animals, then that reuse the those various

Flavia Pease

David. your last repro point. studies, first longer. is the studies, Yes, primary tend to Yes, card impact those Sure, it's

get still the same with revenue units. So less we can

So well. that's all those significantly in driver. the And QX. year-to-date were up studies, year primary have of they versus as last post-IND, been And QX of up they sort types

point prioritizing So of clients goes work. earlier my that, to back again, post-IND

James Foster

those meaningful the essential drugs of a and with to getting be in of a longer just because or are have clinic. studies we much value NHPs are So -- use, of much really through revenue numbers with amount associated higher reduction

to a but help are good So down. shift IND that's a bit for work, It's little say pretty have files why we this [indiscernible], units balance for the least really of post-IND but at a and explanation difficult usually between good year. a

David Windley

it. Got

deck view general Okay. a been like I has that couple technologies, virtual the spare I be way -- the this are and a shift past, in there references. or think, long we'd animals about comments, technology technologies able in silicon Jim, to the probably of know that off. morning are kind of to to those the on as as much

maybe lines of that little I of over references of wanted bit like I deck you'd we're that is, if wondered reading there's -- in lead kind to a And the kind more promise the this comment I One your and context. that? industry going there. morning to am on that

James Foster

Well, I'm that, glad Dave. you asked

And us they River [indiscernible] will give and information. regulators Charles embrace that exist decent a has extent they'll responsibility and clients and utilize to the technologies So to work, actually that. alternative

as of as have we so largest the the provider And [indiscernible] lead. research models, company, largest to

AI, immediately. have multiple different bunch for a of it relatively come modeling one XD once be would except and we investments, mind technologies, So next-generation small, whole particularly sequencing, multiple investments to

do that's probably speed to I I company whole much And drugs And a we another compound clients process efficacy to than but probably less I technologies right helping on field, impossible yesterday sooner the than later with and of sooner that's met going AI and fair to of nonanimal clinic. from lead moving how tell so that we're with the it show the a later in able we'll moving that in there's identify traction that that towards don't or the hopefully, being done it that it's working see and animals. would up a away think see be other can one. being in amount them do can get, work now. And discovery,

about So we that. feel really good

this discovery But maybe think couldn't think the guess I us for I we'll that's some years. the beneficial do sometime -- I X but next it see far industry we how think will And think be and will impact. for of away it don't is, the Dave, in real. I I think substantial. be

likely license. is work, or see I companies that from you're but use highly ever those think way and a wholly which And those we non-[indiscernible] to it's post-sale technologies and to so we model about unlikely extent get are the animals traction speak that -- we we all going it's the never, because technologies word replacement never to time, that, of buy the safety be to long any extent -- that that everybody to so that's best the technologies way To won't use do be appears classic I the to tax, but think best animal we -- off. the think any toxicology which in just a to,

talk traction. said potentially with goal it regulators technologies lot about with it, Dave, multiple Study do Having about on in we're utilize of valuable it, to it, these clients work, has write going all talk just see it, and our to a of shots that, really what to stuff. this make about

do think if about think it's So it do domain, it's do be we're anybody to important. really it talk going going we some We continue think we to because in and is to it, that us. needs lead possible to

David Windley

to one kind Is areas lead Relatedly, and still you anymore? it. relevant? relevant had animals. parentage that the Got faded is that not testing other of and hoped, on strategically of this think, around of Or was I providence that

James Foster

country, animals purpose make that but of clients just sure our for these are that's for directionally, important, the for just going think that regardless spread. know and to regulators I be ourselves to not just that to

actually going we We could what that government yes, that of doing. sort sort slow kind really places of they desire. So animals it's cost-effective be fact from those basis we're agencies found to we are a this nail down to a several that on going get do sense of as and the like

We got working out really it. on fast

uptake be government I the a But in think that Dave, slow think us. even conversation do going a I essential. that with think I is again, more to having that's it's little their of something

have leadership to -- we have there. position the think I

it's by complicated that not way. the I think -- very that,

the it the do pass point But view. effectively genetics from to able the have science. It's going whatever lot whole As -- you know, other can it cost cost identify being I to of specific straightforward of -- we animals, -- think a and relatively not trivial this animals on. so is is genome whole we it's a it

I at would background, for So get back point, still, some to it but say, the we'll Dave, sure. we in

Operator

We from will take with Bank. our Justin Bowers Deutsche question next

Justin Bowers

So X-parter a for -- with booking me.

like seem does safety that the look like the good first quarters, sort on X sort for the run I of of go at the With a bookings and revenue assessment forward? stabilized rate if and

XQ, DSA plus flat, for of minus extra the I -- gets guidance And for or week at last it I example, sort what just the and Q-over-Q. at revenues for we year, look adjust if implies

first flow I you're seeing, And and the the understand bookings cancellations. one. with improvement that's the of So then just that in

the flight way less more Is would in versus are programs of it's any Is be of there in and helpful. cancellations the of Just being is parse it empty nature it improved? out terms sort -- color how canceled? additional that to that there of like those any rooms

James Foster

The better think availability the capacity that. limitations, is they are and NHPs, last worried being and seemingly really that getting clients of before, were funding everything, a good year wouldn't we whatever a people of thing. demand, including cancellation Because year get hope reduction I I had slot. that

some they booked that a of way some and study. was just was news so without which is of out, slot that good booking And a

of of of great. a disruptive, to then planning set that's cancel you when That can yes, to they it. animals they was really cadre certain staff, certain number a get and point So and aside the penalty particularly have and -- a when people

by And headcount think there. is said We're So [indiscernible]. been that's of really the way, we the forecasting slippage always is an isn't and getting and which, we couple a how allocation it's probably to of our our the always pre-COVID a obvious -- back and thing. cancellation plan as cancellation, guidance good And of -- normalization I times, calculus in levels. for

is be a business a So the I basis. growth business I quantify sort we it's stop -- a short to -- actually We of leader. thing. forward-going what the think Safety good continue rate of Assessment the to would of market that's where trying on

get to continue some price. We

of amount to significant get continue volume. a We

of a I fine, we lot which this is stuff into both. moving phase, we want think said we have post-IND just that but

long-term to important studies. short-term doing have of some we Obviously, demand. work But what's studies and that it's both is a I happening we're think going well. have And normalization we're IND slow as

A We where of funding companies. is lot pharmaceutical pretty in VC money is good. from funding coming have quarter fabulous. a biotech second

unmet them to needs come for us companies, [indiscernible] they so you've us. have drugs all have us, heard And say don't to will but will as to come of medical that before, lots and funded, get

about So forward. the demand we optimistic going feel

all As guidance more of a stand that talk I It earlier, not this Day. Investor quarter, we February you said particularly little in folks and year. clear The to clear. about guidance gave behind and X-year is of our be we of finish cadence numbers next at hopefully speed sort will as those we this for specific

Flavia Pease

for revenue provided with organic When maybe math an up correct. And on basis. fourth guidance get we DSA sure you that the follow we the can make the quarter, -- we by later just segment, to it's on

digits at And high DSA, negative growth quarter imply the year, for single would so the there, the probably fourth in fourth a the quarter.

And DSA. again, with to growth extraordinary remind everybody, XXXX XX.X% in an had quarter for fourth we

of So comps impacts that there it. there's bit a

it's math. if know week the don't impact of did your you I when So XXrd the

Justin Bowers

referring was I sequentially -- work year-over-year, versus offline. looking was I that but through to more Yes. happy

Flavia Pease

should It be flattish. right. you're Sequentially,

Operator

next Leonard from UBS. with take We'll question Dan our

Daniel Leonard

weakness specifically, discovery to DSA, make your in But for and like understand gross I of continued in on is sure impact safety? on want appreciate I I what bookings. all direction travel the the your the outlook fully point thoughts at I'd here color

James Foster

all. at Hardly

the So asked question. understand you why I

So safety. our is is goal strategy feeder and very that for Discovery much a

your trivial So question. that's of of DSA part it's a now. obviously [indiscernible] right the the essence revenue

we're good and transitory. and the to love in that's air good parts we science going business, now, Although we right but an pieces, be pocket have and

hold question, that refresh to on particularly Discovery we a generally is of sort of tale your answer kind would my to that's business, just speaking. work. two I of if And say if rocking But it's if To to our beneficial cities. we safety

Our performing in economic safety business environment well. is kind of this funky extremely actually is

people We're say getting I and utilized studies and is and our of share when and capacity price both big well lots capacity, space.

assume that So as which whether future, assume think don't I you are [indiscernible] that's not. pocket and you I continues, true or know and about Discovery you the if

it I by growth and add notice affect it on short some the last or for has margin the rate It really would incremental no business. the And good the very fundamentally back be comes Safety will Also won't has margins. sector. to our just matter. size if notice, and scope beneficial profile and Assessment and It strong, revenue guess also way, can which,

So growth just that. than I has it's you the year, it's even gotten -- well. want But don't certainly before wonderful and last simple. very our before own think had would forget we holding slower that year we're And business nicely profitable. very year I to rate Discovery the though it's the like

clinical to have preclinical get got big they clients, post-IND more market work generate to and and revenue. to because work drugs You've some small, just emphasizing

that's spend X discovery, course, biotech money now X an if That's on year the does, they'll which, years, spend money in what X they from sort they whatever, always-always. of -- they But only of clinic. and is on don't don't years, have nothing what then Discovery, do,

that scientific drugs to the are quite life which great difficult much it's So bit the we're economy. And certainty pendulum has a to on related going back be think it's little to less saving. not with because I these modalities, related and opinion. to to companies are some It's that working powerful. that it's to better our swing got being overall call strength a of the definitely really related funding the We

We surprisingly short. I don't pretty the pricing. it give back is them. ago, we'll good, of said So on And back. is turnaround come Studies as are so notice will of you you. Discovery as watch begins let We'll lot as a know soon to come moment time sort a The fast.

Daniel Leonard

Appreciate of much products that about I you versus was early-stage by more ask could to commercial And proportionately that driven you hoping an call? your might the is possible how the unrelated be talked it's manufacturing Jim. to that reprioritization frame clarification, on if follow-up. products business subject

James Foster

question. Good

So pretty all much all the clinical. CDMO business is

not manufacturing stuff. that that's So

I bit piece a products. to different a of for is the big Yes, than commercial release it's mean, microbial So rest. little lot

less spend through It trying pipeline the less less sure. as to other stuff money So their a yes, in bit. is down manufacture approved for stuff maybe they're and slows the of goes And as products. little clinic

they test go into biologics, also drugs to with the clinic. have before -- we Similarly, those that's

going don't is on clinic clinic, than lot you, the I because they of clinic otherwise the would so they the yes, like just into focused but go and just confuse So a less to care. into stuff

about talked reprioritization their the we pipelines. of But

very budgets on and So both companies, pharma, well the who budgets, big they're even and in has big things. other headcount financed, terms tight of is

So have base who just we've our -- part really a has conservatism seen almost good client definitely entire on portfolios. of they the

did are and way and the They they not Again, 'XX. portfolios, developing all just 'XX their transitory. maybe in prosecuting entire it's

an think So the see to your commercial question see and useful a go the start lot as and my I'm discovery. do stuff we'll opinion folks, so gets for feels I have these into [indiscernible] economist, to through better the to spending a of clinic not specifically, lot the more not clinic. answer this on into market, economy I more products you'll call, But in when testing

Operator

Savant question from will with take We Stanley. our next Morgan Tejas

Tejas Savant

RMS bps XXX I out the mainly on margin NHP it a as line growth. decline in and of mentioned as was you Flavia, More really. one that RMS. across you Maybe top parse the timing China academic mix? latter know cleanup can in-sourcing the in far

contracts? well? you margin of So that and I that is see And flows bit is of help mean, dynamic? sort little and the sourcing through over it margin is lower as to exiting that to frame a sort dynamic what more Or beyond? to from assume XXXX of that, 'XX fair a do the time expect

Flavia Pease

well was lack China shipments line as RMS said, of on of well I combination, impact, our as as top So mix a of margin both the significant the as in RMS segment. as a businesses of NHPs in

some a out, on pointed you had RMS. of of basis, lower lower margin subsegments As within a the higher we growth relative --

resilience seeing, we demand and We're fourth quarter. expect to that clients the from continue the So contracts. perspective, more a government on into larger pharmaceutical

plays that into So the margin.

NHP will fourth And have in the then we shipments. quarter, though,

the pick up So RMS in for the quarter. fourth will margin

think therefore, have we meaningful to signal QX, the was and down. data in that telegraphed margin I any come going had going we to shipments or weren't

have we what with consistent is been this expecting. again, So

in contracts are horizon. lower we Investor that that the that as likely the be would we we the margin and will start far exiting Day, in XXXX announced As government expect that

Tejas Savant

mentioned then on basis. margin manufacturing super helpful. I biggest And here go-forward Jim, your the prepared Got support mean, it. outlook expansion. in you That's one is driver of on obviously, a the just remarks, margin

here, environment, little what know be next a called the macro year of here assumption? XQ but a beyond light headwinds a China fair complex seeing in it's flattish you RMS I bit Just NHPs. also of additional margins out headwinds

of on So color for margin XXXX would sort directional just any super [indiscernible] be helpful. trajectory

James Foster

get would super but I wait helpful, I be asking. I to that have you but know it February clarity, appreciate to until

Flavia Pease

Tejas, But that demand as I the actions or environment to all in adjusted as with though, timing say, in the we XXX feel this Investor of as started Jim you shared of will we play would still the current into remarks, also horizon. X-year are of that ensure XXXX. over some And obviously, we the that my reflective year. I about Day. also, good period bps of prepared we that, environment a already we have took into indicated X-year linear go said, main appropriately with we appropriately The not that it's during

we you pieces February. your XXXX take those provide until for estimates in and let make So I'll guidance

Operator

William next take Max Blair. We will question Smock with our from

Max Smock

To lot start, a to different in Derik's try just a from way. maybe get question earlier here, I'll at

do And as have were NHP your a the pricing with margins work few on over that XXXX. on compared side? the the So increases of last in your million How associated the about this disclosures result NHP-related operating the of NHP DSA to how $XXX this margins year? NHP imply changed revenue margins years

comments hear curious on actually given in pricing have as margins I'd guide your move part your And moving normalizing baked we forward. forward, for to then about in some what your on work here of be take terms as of here, you midterm assumptions NHP

Flavia Pease

tend several I've can And has start, work, NHP some a They I'll do. species we than over margins slightly to basis, longer. we Jim maybe this be commented sometimes other the quarters. on on the I So -- add. [indiscernible] of higher think last and complex, relative more

biologics within drives do. species higher for there so a mix had that total And has that impact NHP our is demand work we that work favorable as grown, and study been

is been And Jim, comments. but that tailwind. We unrelated you So to know will has add think that on continue we've discussions want that don't that been maybe, not, having if the a to I or price. some if

James Foster

I think that's all.

Max Smock

Okay. Perfect. of ago on just minutes And a from question then maybe up couple following here. Dan's

discovery just ultimately, strategy to where we've in confirm like wanted to you heard in doesn't change slowdown that the starts safety not right, seen towards the the impact preclinical. bookings the point to is pipeline of that couple assessment. over But we're gets quarters in I that then the I clinical and here mentioned gross your last You work And discovery slowdown close the stage.

get eventually think we do you and And point? trial start I guess, when Discovery in to slowdown we've to that to demand? clinical when get at concerned? do Like more we should seen the will start heavily impact preclinical

James Foster

discovery benefits times our client and balanced with this When And nuance base spending a portfolio. Don't stuff, good, stuff. are the not regard post-IND in concerned the to revenues, the has preclinical to It's That happened. clinic. tend see development. first be When we they time concerned. about is whole

So go there before.

development the of and terms and in of a back and growth strength companies, have spend in And solidity the go they to discovery.

and it's plan have call So impossible our to call for to time, next year. we'll just of although it's matter for a operating it, obviously

our before, the what is trivial pleased we're pleased we still But with business, scale, I comparison. put discovery with said together by as which

business no time on Assessment really to of it's our Safety have growth any So going soon. impact the

our but hard this detriment. a about safety, As a we it be flow-through was much the safety, Discovery to molecules give someday. a I I maybe stuff XX% different see I if discovery don't but clients were continue moving benefit, suppose be could have successful being we'll there for larger, of really to positive -- might I from business to and said you as that's work answer, for before, a

It's now. we are not right where

useful connected on that basis. but connected, understand look kind to are actually it's of they I it at a So

So our results. report primarily Safety what essentially you we see DSA Assessment is when

Operator

next our TD from with Charles Rhyee Cowen. take question We'll

Charles Rhyee

the a overall. on how cadence fourth had think of question quarter guidance, of generally sort I just to

during trends I of period well of year as sort and the think quarter earnings. Obviously, the your pre-COVID, strongest your wasn't discussing. typically of case some fourth this as tough was COVID terms case from quarter the that in certainly comps you're the not

the normalizing. quarter, period. we If to range ex-COVID point, kind fourth off is It as of backlog getting is like we're think about period? of a rates here for going the this a though, we're seems and to slowing, jumping maybe good normal the are more Cancellation kind

year And and for be the we down at quarter getting the quarter so first least next normal to of would a of to point expect earnings? think we cadence more jump-off sequentially fourth back

Flavia Pease

for Our -- what from about point quarter, indicated remarks from I outlook by in decline, is which a an organic first mid-single-digit mean right? fourth not, jump-off XXXX. my think, on as growth be thinking I you depends the should revenue, our It it's rate, you how

of giving quarter -- think performance impacted to without by we the close high extraordinarily -- XXXX, XXXX, had in fourth into is because any being with quarter growth. comps fourth we the I putting Without XX% guidance

growth talking I you're if So rates, careful. to about be have

Charles Rhyee

standpoint. a From dollar

Flavia Pease

Yes.

fourth earlier, out, our from flattish, the of Normally, standpoint, seen dollar tends down environment, a fourth third and it's But to think, the a to some we've a I sort bit quarter quarter So quarter. slightly I versus I be do, I think perspective. think from we little pointed that plays from quarter. largest you our the as impacts demand dollar into commented

look at We really encourage guys us on annualized you basis. to an

NHP things quarter-to-quarter. timing half, pointed like strong growth we the the was half, China, half other We rate, have there's to There's last compare second then year, out, first as we very out. of in a from relatively comps half fluctuations second shipments I when lower and was first as pointed

Charles Rhyee

up that. could if I on quickly And just Great. follow

James Foster

Use I the entire year it's as the jumping we're off think what saying. point

to quarters half we've will complicated vise The positive discern. -- had year, and certain this us versus first rate versa. a year we comps last a had second of sort So is some growth assumption almost and that for year be

I good annual you guidance. think a very at giving we job do

as the we But and going and we So margin that year. to reasonable going to some jumping rate year I you an try fourth can result. sort just just growth quarter subject that's whatever erroneous next to is of give full embrace the whatever pricing you assume point, do is gather what if is think for volume with off to whatever the continue,

Charles Rhyee

understood. I that Yes, If up follow NHP. could on

a the specific is root of called over is shipments? having been the noticeable or very Has just cause so? out needed happening difference recently? the there the just always more this more of that be timing kind not not constant on business something what of or until Just to last just Or sort in in year

James Foster

Yes. call when don't been impact have had We out always number No, available. I of of we is positive. mean We have pretty we it big. because it a numbers and was quite are X it's get it sort lot The to unpredictable control there. of the NHPs and

Chinese who clients, handful want local a have We of them. clients

take them. them that say of sometimes And them or want don't don't they in a slides, they they they take and all certain quarter,

again, bit but a we should that unpredictable, little we selling year. the it's So anticipated end during fiscal all had up

were numbers than a So animals they slightly available years that ago. less was couple said earlier of we have of

And well. impact has that as an so

Operator

We'll next Guggenheim take Wallace question Securities. Jack from with our

Jack Wallace

I one disclosure. appreciate all Quick again, NHPs, the on and

about certainly the than I million of was be to recall there to million half think -- expected $XXX $XXX you the the impact back that less or due or supply half for year constraints.

there It NHP that. Was was any in we the quarter? quarter, called the third out beat was previously drop there in like revenue looks or in there that a that related to solid you DSA experienced impact possibly

Flavia Pease

Yes.

clients -- disruptions our an the that needs beginning of impact ensuring mitigate incredible been the So throughout in of we almost of the has team the we the and of support could year the I we've expecting year. were supply done think the job all

DSA the saw, a digit. so of guidance for segment updated as to as that, year full we our now single actually high result And you

And NHP impact disruption of minimis has actually and de has really been allowed DSA us would the supply to the so really I think guidance. -- increase

Jack Wallace

over manufacturing, testing about quickly That's thinking business. to fantastic. the then And

are versus, for mix to pre-COVID? in put today testing in where say, demand Just demand of context terms the for we roughly, vaccines,

snapback to get level at as idea diminishing, historical whether there's inventories Just been if norms. We're there's -- have a -- an elevated still an to above here. trying compared

James Foster

the I huge just be is pull clinic. be of we're to higher. got tested back. just should in think What numbers highjacked to COVID, the with emphasis now the A back historical of getting levels lot that coming a sort the stuff encompassing of work testing or generally through of drugs

not snapback get our -- unlike discovery business, Again, quickly snapback biologics quickly.

more back do We -- going studies with of just cadence a year. we predictable lotus. experiencing have very valuable in a that this think Historically, more that come been short-term of we're there's they But the of the for growth forward, regard we're margin steady over had onset discovery of historical biologic Microbial has to margins. [indiscernible] sort rates years. good heading last with a grower the years and exceptional very XX few accretion -- literally, been

prepared growing as And now the obviously improved. of it our phase the asked performing well, we nobody segment's and but that bunch -- will will top our commercial That CDMO move manufacturing be to regulatory clinical bottom nicely, accretive about, remarks, hopefully clients is think from of line has business, audits, the several in margins do a phase. which

Operator

with next from Josh take our Waldman question Research. Cleveland We'll

Joshua Waldman

comment here safety you're any could competitive wondered availability DSA. you or one guess demand cancellations seeing if recent assessment? Just and resulted whether discounting or I competitive Curious levels changes changes in broader the have in in I the on fluctuations, Jim, landscape? on maybe landscape capacity any

James Foster

We're not.

our larger, broader manufacturing of than science the discovery aspects business, much other significantly have footprint the deeper we manufacturing are -- We our and also a on business. parts competitors. the of particularly And connectivity

So we're changes. not any fundamental seeing

exception, price. I smaller would have us competitors. We and with without on that they compete primarily essentially say

study can an think study an general okay but toxicology okay I they for do not for you, definitely you. complex

small very And of some and capacity. very footprints have limited them

we're share. So and I think holding taking

business. we're appropriate. We'll we when tell of our client that last the got a I bidding much But get we that aggressive if think new somebody's few getting generally, price you I we better paid we've work. the for aggressive have or on complexity novo over that have won't feel years, we're pricing. attacking never de big

where complex, have clients. think expensive dynamic for going your don't is So to I have to a the business a of history you probably competitive lot change. It's

So you. appreciate

we're working sufficient know us So hard better to have I think tend folks to capacity. that to come

world. say talking facilities. the don't when in And about place, but So not we away. all facilities I just capacity, them and I'm turn facilities staffing And one over

good we would particularly but I posture competitive safety. feel in our say particularly in So about our most businesses, of

Operator

We'll take from question Wells Fargo. with our Daley next Tim

Timothy Daley

infrastructure, So model, first, safety call wasn't just the noticed on like this of kind a there really the quarter that tox large reorg of recent of mention quasi-offshoring. the

profits? stabilized kind more set does we've all to disruptions that curious, or top of just place, So mean no in line that

And were think from then margin this if DSA year-to-date margins on what to the was specifically? that we headwind the about undertaking,

James Foster

we your So it question encountered of might the I thought and that disruption NHP assume first profound. at part the more is about year beginning the be of

a So that you have infrastructure. we is international tell can large we that all

JVs, long-term position, which have an We supply, of we of contracts. all some we of have and sources we them multiple have ownership have some

So we very to with anything numbers can't are sufficient the harmony in NHPs. except authorities. I local future, of we about guarantee you have operating regulatory that tell good

our the way high-quality really have of healthy pleased with We very numbers disruption been it. handling multisources. are and clients from with had sufficient no animals We've to we've

for move stability the have next of will don't months, as We next of which we supply unless terms into something the year in anticipate. same of assumption we NHP happens and case sure, in couple

support we I that client So as disruption was disruption can beginning of that circumstances. of at now, ensure guarantees. anticipate we the disruption, our think of a the any own, we of we're for some the set fault no question of to year are your little a But and as We through don't we view. everything very doing question. things our was from take don't looking had stable have right part second and point

Flavia Pease

margin, margin, DSA think to and been of impact basis, the in year-to-date quarter second part has on the terms The strong. both I on a

done think have sure was impact of done any the there tremendous practically situation, a we no on I that demand. into making as Jim teams accommodate said, the we've so we navigated movement job and margin -- the And supply our made that to

Timothy Daley

just really a All Jim, helpful. That's follow-up here. right. And Got it.

prior JV end XQ in post animal a of a On mention side of supplier of majority the acquisition supply large a the the business. things, quarter model stake the of was filing, DSA XX-Q in there

I grossing that up gets almost $X.X it to entity. of think valuation kind billion for

Location, us great. please that? just some strategy, you help be plan, would could So some on just there detail provide

James Foster

Sure.

too be it tranche, the can't bought. first I since So hasn't we closed specific But yet.

big a piece own business. of we So this

we in for of running of quite it supply source rest that confident time. it close, own over that high-quality participate site very So that the And will worked and with years. we I essentially we will will site. obviously, hopefully, expanding the

positive just to it in is, hopefully, way is. monkeys that's be location. another quality it you where particularly availability that's the [ able what the -- are. not-too-distant and that, ensure good a who ] give high And We'll on the for clarity to future, of it's -- ramifications

Flavia Pease

think we that the had. question was probably I last

wrap share as of we or suggested. we NHP to go I on pricing, back per Matt question Derik's do the want Before $X to up,

because million And all you that have suppliers we costs and of it's years. of not have with NHP up from OI gone -- true X cumulative the share past of all the that would mean meaningfully over to $XXX EPS. over last NHP almost down dropped X of Because just our benefit would pricing that years that the also

assure increase much But how you that as reasons, to competitive And you provide up costs they for meaningfully. so the details on I we're might have going not imagine. can come

the math on that $X think, per share, overstates So the I significantly.

Operator

you. Thank

We have the turn for back remarks. to no I will Spencer conference further closing questions queue. in Todd

Todd Spencer

upcoming on us the joining We you for this to investor you conference morning. and the a seeing look have This conferences forward call Thank Great. Thank at concludes great day. call. you.

Operator

Third Thank for River Charles Earnings does you That today's Call. you. Laboratories Quarter conclude your Thank participation. XXXX

may You now disconnect.

Charles River Laboratories International (CRL) 8 Nov 232023 Q3 Earnings call transcript